Limbach Holdings Reports Second Quarter 2018 Results

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Q2 2018 Revenues up 18.4% Versus Prior Year; Aggregate Backlog of
$492.5 million at Quarter End

Conference Call Scheduled for 9:00am ET Wednesday August 15, 2018

PITTSBURGH--(BUSINESS WIRE)--
Limbach Holdings, Inc. (NASDAQ:LMB) (“Limbach” or the “Company”) today
announced financial results for the quarter ended June 30, 2018. Total
Q2 2018 revenues increased 18.4% versus the prior year period to $139.5
million. Construction segment revenue grew 18.2% from the prior year
period while Service segment revenues gained 19.3%.

Other key financial highlights of the quarter included:

Gross margin was 11.3% in the second quarter of 2018, compared with
13.2% in the second quarter of the prior year. During the second
quarter of 2018, gross profit was negatively impacted by $3.6 million
of project-related write-downs in the Company’s Mid-Atlantic branch.
Excluding the impact of the Mid-Atlantic branch’s second quarter 2018
results, gross margin would have been 14.8%, an increase of 180 basis
points year over year.

Construction revenue growth of 18.2% versus the same quarter in 2017
was primarily the result of strong activity levels in the New England,
Southern California, Ohio, Florida and Mid-Atlantic regions, partially
offset by declines in the Michigan and Western Pennsylvania regions.

Service segment revenue increased 19.3% to $25.8 million in the second
quarter of 2018, compared with $21.6 million in the year-ago quarter.

Selling, general and administrative (“SG&A”) expenses totaled $13.7
million in the second quarter of 2018, down from $15.7 million in the
first quarter of 2018 and up modestly from $12.8 million in the second
quarter of 2017. As a percentage of revenues, second quarter 2018 SG&A
expenses were 9.8%, compared with 13.0% in the first quarter of 2018
and 10.9% in the second quarter of 2017.

Net income attributable to Limbach Holdings, Inc. common stockholders
in the second quarter of 2018 was $0.7 million, compared with $0.4
million for the same quarter of 2017.

Construction operations contributed 81.5% of total revenue, while
Service operations contributed 18.5%.

Aggregate backlog at June 30, 2018 was $492.5 million, compared with
$452.5 million at March 31, 2018 and $461.4 million at December 31,
2017. Current backlog consists of $47.2 million of Service work and
$445.3 million of Construction work. Limbach expects approximately
$217.4 million of current, aggregate backlog to be recognized as
revenue in fiscal 2018.

The Company is increasing 2018 revenue guidance by $10 million to a
range from $530 million to $550 million while reducing Adjusted EBITDA
guidance to a range from $18 million to $20 million.

Management Commentary

Charlie Bacon, CEO of Limbach, commented, “Last quarter I noted how our
sales activity was off to a great start in 2018 and that momentum has
not only continued but accelerated in the second quarter. We ended the
quarter with backlog of $492.5 million, with an additional $381 million
of business that has been promised to us but not yet recorded as
backlog. These sales are spread across the company, with a large portion
of the promised business being won by our new office in downtown
Detroit. We are very pleased to see that office generating such
immediate opportunities, which is on the heels of the completion of the
Detroit Red Wings arena, the largest contract in the company's history.
Detroit is coming back strong and Limbach is well positioned to continue
to capture new business for both our construction and service segments.”

Mr. Bacon continued, “Overall, macro conditions in our industry –
non-residential construction – are very strong and we are optimistic
that this dynamic will remain in place for the next several years. We
did unfortunately continue to face scheduling issues in our Mid-Atlantic
branch on several projects which resulted in additional write-downs. We
have taken significant steps in response, including the transfer of key
operational management resources from other branches to complete our
contracted work and pursue recovery on several large projects where
scheduling issues impacted our results. A number of these large-scale
projects have now been substantially completed.”

Mr. Bacon added, "Regarding our acquisition activities, our team has
reviewed over 100 companies and are actively continuing our examination
of approximately 30 companies in our pipeline. We are in various late
stage discussions with several attractive companies and remain laser
focused on our criteria and our focused strategic growth plan. I look
forward to sharing more information during our scheduled earnings call."

Second Quarter Summary

Revenues

Second quarter 2018 revenues of $139.5 million were up 18.4% versus
$117.8 million for the prior year period, as both the Construction and
Service segments recorded strong growth. Construction segment revenues
of $113.7 million were up 18.2% while Service segment revenues of $25.8
million were up 19.3%. Construction operations accounted for 81.5% of
revenues while Service operations provided the remaining 18.5%.

Gross Margin

Gross margin for the second quarter of 2018 was 11.3%, compared with
13.2% in the year ago quarter. Service segment gross margin improved to
24.4%, compared with 21.1% in the year ago quarter, as service work
volume increased along with more favorable project pricing. Construction
gross margin decreased $1.5 million or 13.5% during the second quarter
of 2018 due to write-downs of approximately $3.9 million on seven jobs,
resulting from revisions in contract estimates. As a result,
Construction segment gross margin was 8.4% for the second quarter of
2018 compared to 11.4% for the second quarter of 2017. Excluding the
second quarter 2018 results of the Mid-Atlantic branch, consolidated
gross margin would have been 14.8%. On a dollar basis, gross profit in
the second quarter was $15.8 million, compared with $15.5 million for
the prior year period.

Selling, General and Administrative (“SG&A”)
Expense

Second quarter 2018 SG&A expenses were $13.7 million, compared to $12.8
million in the prior year period and $15.7 million in the first quarter
of 2018. The year over year increase in SG&A expenses was primarily due
to $0.7 million of stock-based compensation expense associated with
restricted stock units granted since June 30, 2017 and incremental total
segment-related expenses of $0.7 million due to higher salary and
benefits costs related to new hires at our branches, as partially offset
by a $0.3 million decrease in Corporate SG&A expense as a result of
certain nonrecurring professional fees that were only paid in the 2017
period. As a percentage of total revenue, second quarter 2018 SG&A
expenses accounted for 9.8% compared with 10.9% in the second quarter of
2017 and 13.0% in the first quarter of 2018. SG&A expenses as a
percentage of revenue declined on both a sequential and year over year
basis as the Company was able to hold expenses relatively level while
revenues grew at a robust rate.

Net Income

Net income attributable to Limbach Holdings, Inc. common stockholders
for the second quarter of 2018 was $0.7 million, compared with net
income of $0.4 million in the prior year period. During the second
quarter of 2017, the Company incurred a charge of $0.2 million relating
to dividends on cumulative redeemable convertible preferred stock. Due
to the completed redemption of the preferred shares during the first
quarter of 2018, the Company did not record any charges for dividends
thereon in the second quarter of 2018.

Six Months YTD Summary

Revenues

Year-to-date 2018 revenues of $260.1 million were up 11.6% versus $233.0
million for the prior year period. Construction segment revenues of
$210.5 million were up 12.2% while Service segment revenues of $49.5
million were up 9.2%. Construction operations accounted for 81.0% of
revenues while Service operations provided the remaining 19.0%.

Gross Margin

Gross margin for the first six months of 2018 was 11.2%, compared with
12.6% in the year ago period. Service segment gross margin was 20.8%,
compared with 20.7% in the year ago period. During the first six months
of 2018, Construction segment margins were negatively impacted by
write-downs of approximately $8.0 million on nine jobs, due to revisions
in contract estimates. As a result, Construction segment gross margin
was 8.9% for the year-to-date 2018 period compared to 10.6% for the
comparable 2017 period. Excluding the results of the Mid-Atlantic branch
for the first six months of 2018, gross margin would have been 15.2%.
For the first six months of 2018, one project in the Service segment
experienced a write-down of $0.9 million. On a dollar basis, gross
profit for the first six months of 2018 was $29.1 million, compared with
$29.3 million for the prior year period.

Selling, General and Administrative Expense

Year to date 2018 SG&A expense was $29.4 million, compared to $27.4
million in the prior year period. For the six months ended June 30,
2018, Corporate SG&A expense included $1.1 million of stock-based
compensation expense associated with the grant of restricted stock
units. Additionally, Corporate SG&A expense decreased by $1.2 million
for the first six months of 2018 as a result of certain nonrecurring
professional fees that were only paid during the 2017 period. For the
six months ended June 30, 2018, we incurred $2.0 million of incremental
combined segment-related SG&A expense due to $2.2 million in higher
salary and benefits costs related to new hires at our branches, as
partially offset by the absence of $0.2 million in 2017 bad debt expense
related to a bankrupt customer. As a percentage of total revenue, 2018
year to date SG&A accounted for 11.3% compared with 11.7% in the prior
year. SG&A expense as a percentage of revenue declined as revenues grew
at a faster rate than SG&A expense.

Net Loss

Net loss attributable to Limbach Holdings, Inc. common stockholders for
the first six months of 2018 was $(3.8) million, compared with a net
loss of $(1.0) million in the prior year period. A key item accounting
for the difference in year over year performance was $2.2 million of
cash premium paid in the first six months of 2018 related to the
redemption of the Company’s redeemable, convertible preferred stock.

Backlog

Aggregate backlog at June 30, 2018 was $492.5 million, an increase of
8.8% compared with $452.5 million at March 31, 2018. The Company also
has commitments for $381 million of Construction work which has not yet
been recorded as backlog. Within the aggregate backlog figures,
Construction backlog at June 30, 2018 was $445.3 million, versus $413.9
million at March 31, 2018 and $426.7 million at December 31, 2017, an
increase of 7.6% and 4.4%, respectively. In addition, Service backlog at
June 30, 2018 was $47.2 million, compared to $38.6 million as of March
31, 2018 and $34.7 million at December 31, 2017, an increase of 22.3%
and 36.0%, respectively. The Company expects approximately $217.4
million of total backlog to be converted to revenues within the current
fiscal year.

Balance Sheet

At June 30, 2018, the Company had current assets of $175.0 million and
current liabilities of $155.7 million, representing a current ratio of
1.12x. Working capital was $19.3 million at June 30, 2018, a decrease of
$11.4 million from December 31, 2017. The change in working capital was
due to the usage of cash to pay down the Company’s revolving credit
facility, an increase in net overbillings and the reclassification of
the Company’s bridge term loan from long-term to current due to its
contractual maturity in the next twelve months. Long-term debt was $21.1
million at June 30, 2018, up from $20.6 million at December 31, 2017.

2018 Guidance

The Company is increasing its previously announced revenue guidance for
2018 while reducing its previously announced Adjusted EBITDA guidance,
as summarized in the table below.

FY 2018 Estimates

Current

Previous

Revenues

$530 - $550 million

$520 - $540 million

Adjusted EBITDA

$18 - $20 million

$20 - $24 million

With respect to projected fiscal year 2018 Adjusted EBITDA, a
quantitative reconciliation is not available without unreasonable
efforts due to the high variability, complexity and low visibility with
respect to taxes and other items, which are excluded from Adjusted
EBITDA. We expect the variability of this item to have a potentially
unpredictable, and potentially significant, impact on our future GAAP
financial results.

Common stock, par value $0.0001, 100,000,000 shares authorized;
7,542,249 issued and outstanding at June 30, 2018 and 7,504,133 at
December 31, 2017

1

1

Additional paid-in capital

53,753

54,738

Accumulated deficit

(8,294

)

(6,579

)

Total stockholders' equity

45,460

48,160

Total liabilities and stockholders' equity

$

223,311

$

213,020

LIMBACH HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

Six months ended June 30,

Cash flows from operating activities:

2018

2017

Net loss

$

(1,715

)

$

(545

)

Adjustments to reconcile net income to cash provided by operating
activities:

Depreciation and amortization

2,798

5,359

Provision for doubtful accounts

47

245

Stock-based compensation expense

1,121

0

Amortization of debt issuance costs

144

90

Deferred income tax benefit

(750

)

(679

)

Accretion of preferred stock discount to redemption value

0

4

(Gain) loss on sale of property and equipment

(40

)

136

Changes in operating assets and liabilities:

(Increase) decrease in accounts receivable

(8,060

)

11,218

(Increase) decrease in costs and estimated earnings in excess of
billings on uncompleted contracts

283

1,840

(Increase) decrease in other current assets

(1,394

)

(72

)

(Increase) decrease in other assets

(289

)

0

Increase (decrease) in accounts payable

(6,017

)

(11,201

)

Increase (decrease) in billings in excess of costs and estimated
earnings on uncompleted contracts

15,407

(8,987

)

Increase (decrease) in accrued taxes

(2,222

)

0

Increase (decrease) in accrued expenses and other current liabilities

1,112

2,789

Increase (decrease) in other long-term liabilities

255

97

Net cash provided by operating activities

680

294

Cash flows from investing activities:

Proceeds from sale of property and equipment

123

7

Purchase of property and equipment

(2,117

)

(1,656

)

Net cash used in investing activities

(1,994

)

(1,649

)

LIMBACH HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows - Continued

(Unaudited)

Cash flows from financing activities:

Increase in bank overdrafts

4,869

0

Payments on Credit Agreement term loan

(1,500

)

(3,365

)

Proceeds from Credit Agreement revolver

67,039

44,553

Payments on Credit Agreement revolver

(66,594

)

(44,553

)

Payments on term loan

0

(33

)

Proceeds from Bridge Term Loan

10,000

0

Payments on Bridge Term Loan

(1,764

)

0

Payments on financed insurance premium

0

(1,164

)

Payments on capital leases

(957

)

(804

)

Convertible preferred stock redeemed

(9,191

)

0

Convertible preferred stock dividends paid

(875

)

0

Taxes paid related to net-share settlement of equity awards

(83

)

0

Net cash provided by (used in) financing activities

944

(5,366

)

Decrease in cash and cash equivalents

(370

)

(6,721

)

Cash and cash equivalents, beginning of period

626

7,406

Cash and cash equivalents, end of period

$

256

$

685

Supplemental disclosures of cash flow information

Noncash investing and financing transactions:

Property and equipment financed with capital leases

$

1,521

$

718

Interest paid

$

1,184

$

927

Financed insurance premium

$

0

$

2,135

LIMBACH HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

Three months ended June 30,

Increase/(Decrease)

(in thousands, except for percentages)

2018

2017

$

%

Revenue

Construction

$

113,735

$

96,221

17,514

18.2

%

Service

25,796

21,617

4,179

19.3

%

Total revenue

139,531

117,838

21,693

18.4

%

Gross profit:

Construction

9,501

10,979

(1,478

)

-13.5

%

Service

6,297

4,559

1,738

38.1

%

Total gross profit

15,798

15,538

260

1.7

%

Selling, general and administrative expenses:

Construction

6,696

5,172

1,524

29.5

%

Service

3,345

3,551

(206

)

-5.8

%

Corporate

3,644

4,064

(420

)

-10.3

%

Total selling, general and administrative expenses

13,685

12,787

898

7.0

%

Amortization of intangibles (Corporate)

336

1,016

(680

)

-66.9

%

Operating income (loss):

Construction

2,805

5,807

(3,002

)

-51.7

%

Service

2,952

1,008

1,944

192.9

%

Corporate

(3,980

)

(5,080

)

1,100

21.7

%

Operating income

$

1,777

$

1,735

42

2.4

%

LIMBACH HOLDINGS, INC

Condensed Consolidated Statements of Operations

(Unaudited)

Six months ended June 30,

Increase/(Decrease)

(in thousands, except for percentages)

2018

2017

$

%

Revenue

Construction

$

210,545

$

187,686

22,859

12.2

%

Service

49,535

45,342

4,193

9.2

%

Total revenue

260,080

233,028

27,052

11.6

%

Gross profit:

Construction

18,772

19,928

(1,156

)

-5.8

%

Service

10,313

9,378

935

10.0

%

Total gross profit

29,085

29,306

(221

)

-0.8

%

Selling, general and administrative expenses:

Construction

14,455

12,453

2,002

16.1

%

Service

7,471

7,002

469

6.7

%

Corporate

7,425

7,898

(473

)

-6.0

%

Total selling, general and administrative expenses

29,351

27,353

1,998

7.3

%

Amortization of intangibles (Corporate)

671

2,024

(1,353

)

-66.8

%

Operating income (loss):

Construction

4,317

7,475

(3,158

)

-42.2

%

Service

2,842

2,376

466

19.6

%

Corporate

(8,096

)

(9,922

)

1,826

18.4

%

Operating loss

$

(937

)

$

(71

)

(866

)

-1219.7

%

* Use of Non-GAAP Financial Measures

Adjusted EBITDA

In assessing the performance of our business, management utilizes a
variety of financial and performance measures. The key measure is
Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure. We
define Adjusted EBITDA as net income (loss) plus depreciation and
amortization expense, interest expense, and taxes, as further adjusted
to eliminate the impact of, when applicable, other non-cash items or
expenses that are unusual or non-recurring that we believe do not
reflect our core operating results. We believe that Adjusted EBITDA is
meaningful to our investors to enhance their understanding of our
financial performance for the current period and our ability to generate
cash flows from operations that are available for taxes, capital
expenditures and debt service. We understand that Adjusted EBITDA is
frequently used by securities analysts, investors and other interested
parties as a measure of financial performance and to compare our
performance with the performance of other companies that report Adjusted
EBITDA. Our calculation of Adjusted EBITDA, however, may not be
comparable to similarly titled measures reported by other companies.
When assessing our operating performance, investors and others should
not consider this data in isolation or as a substitute for net income
(loss) calculated in accordance with GAAP. Further, the results
presented by Adjusted EBITDA cannot be achieved without incurring the
costs that the measure excludes. A reconciliation of Adjusted EBITDA to
net income (loss), the most comparable GAAP measure, is provided below.

Reconciliation of Adjusted EBITDA to Net
income (loss)

Three months ended

Six months ended

June 30,

June 30,

(in thousands)

2018

2017

2018

2017

Net income (loss)

$

709

$

669

$

(1,715

)

$

(545

)

Adjustments:

Depreciation and amortization

1,427

2,713

2,798

5,359

Interest expense

799

563

1,568

1,017

Non-cash Stock-based compensation expense

654

0

1,121

0

Income tax provision (benefit)

293

404

(750

)

(679

)

Adjusted EBITDA

$

3,882

$

4,349

$

3,022

$

5,152

About Limbach

Founded in 1901, Limbach is the 10th largest mechanical
systems solutions firm in the United States as determined by Engineering
News Record. Limbach provides building infrastructure services, with
an expertise in the design, installation and maintenance of HVAC and
mechanical, electrical, and plumbing systems for a diversified group of
commercial and institutional building owners. Limbach employs more than
1,500 employees in 14 offices throughout the United States. The
Company’s full life-cycle capabilities, from concept design and
engineering through system commissioning and recurring 24/7 service and
maintenance, position Limbach as a value-added and essential partner for
building owners, construction managers, general contractors and energy
service companies.

Forward-Looking Statements

We make forward-looking statements in this press release within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements relate to expectations or forecasts for
future events, including, without limitation, our earnings, adjusted
EBITDA, revenues, expenses, capital expenditures or other future
financial or business performance or strategies, results of operations
or financial condition. These statements may be preceded by, followed by
or include the words “may,” “might,” “will,” “will likely result,”
“should,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,”
“anticipate,” “believe,” “seek,” “continue,” “target” or similar
expressions. These forward-looking statements are based on information
available to us as of the date they were made, and involve a number of
risks and uncertainties which may cause them to turn out to be wrong.
Accordingly, forward-looking statements should not be relied upon as
representing our views as of any subsequent date, and we do not
undertake any obligation to update forward-looking statements to reflect
events or circumstances after the date they were made, whether as a
result of new information, future events or otherwise, except as may be
required under applicable securities laws. As a result of a number of
known and unknown risks and uncertainties, our actual results or
performance may be materially different from those expressed or implied
by these forward-looking statements. Please refer to our most recent
annual report on Form 10-K , which is available on the SEC’s website (www.sec.gov),
for a full discussion of the risks and other factors that may impact any
forward-looking statements in this press release.